M/S Maa Bhagwati Shiksha Samiti v. Commissioner Of Income Tax And Two Others

Neutral Citation No. - 2023:AHC:227959-DB IN THE HIGH COURT OF JUDICATURE AT ALLHABAD Present: The Hon’ble Justice Siddhartha VarmaThe Hon’ble Justice Shekhar B. Saraf WRIT TAX NO. 476 OF 2022 M/S MAA BHAGWATI SHIKSHA SAMITI VS COMMISSIONER OF INCOME TAX AND TWO OTHERS For the PetitionerMr. Ashish Bansal, Advocate Mr. Ashish Raj Shukla, Advocate For the respondentMr. Gaurav Mahajan, Advocate Mr. Manu Ghildyal, AdvocateMr. Praveen Kumar, AdvocateMr. Praveen Kumar, Advocate Last heard on : November 29, 2023Judgment on : December 06, 2023 1. Heard learned counsel for the petitioner and learned Standing Counsel for the Income Tax Department. 2. The writ petition has been filed seeking the following reliefs: a. stay the effect and operation and implementation of the noticedated 31.03.2021 relating to assessment year 2013-14 issued by therespondent no. 2 under Section 148 of the Income Tax Act on thepetitioner;dated 31.03.2021 relating to assessment year 2013-14 issued by therespondent no. 2 under Section 148 of the Income Tax Act on thepetitioner; b. stay the effect and operation and implementation of the notice dted13.01.2022 and 03.03.2022 issued under Section 142(1) of the IncomeTax Act and disposal letter dated 03.03.2022 issued by respondent no.3 on the petitioner for making compliance;13.01.2022 and 03.03.2022 issued under Section 142(1) of the IncomeTax Act and disposal letter dated 03.03.2022 issued by respondent no.3 on the petitioner for making compliance; c. restrain the respondent nos. 2 and 3/revenue authorities fromcontinuing the reassessment proceedings over the petitioner, else thepetitioner will suffer grave and irreparable loss and injury;continuing the reassessment proceedings over the petitioner, else thepetitioner will suffer grave and irreparable loss and injury; d. grant such other ad-interim ex-parte relief in terms of prayer (a)(b)and (c) above. 3. Learned counsel for the petitioner submitted that the petitioner is asociety created on 14.02.2006 and got itself registered with the Registrar ofSociety, Uttar Pradesh under Societies Registration Act, 1860 bearingregistration no. 1398/2005-06 for carrying out charitable work by impartingeducation through its institutions run by it. It had also the registered undersection 12A of the Act on 25.09.2008 by the CIT-1, Kanpur, vide certificateof registration no. 630/1335/नि�बंधक/तक�ीकी/का�पुर/2474. 4. The petitioner society was maintaining regular books of account andother records which were subjected to audit under section 12-A(b) of theIncome Tax Act, 1961 (hereinafter referred to as ‘the Act’). For the yearunder consideration, that is, A.Y. 2013-14 it had filed its return on31.03.2014 disclosing nil income after claiming exemption under section 11of the Act. As the overall utilization during the year fell short by 17.02%(Rs.1,58,56,689/-) from prescribed limit of 85% it had issued Form – 10 asper Rule 17 of Income Tax Rules, 1961 (hereinafter referred to as ‘theRules’) which was filed before the Income Tax Department on 31.03.2014. 5. Return filed by the petitioner society was selected for scrutiny andnotice under section 143(2) dated 22.09.2014 was issued, followed bynotices, under section 142(1) of the Act, query letter and order sheet entries.In response to the notices/ queries raised by the Assessing Officer, books ofaccount, audited balance sheet, Form – 10 and further information wereplaced on record. After verifying the same, assessment order dated20.01.2016 was passed by Respondent No.2 under section 143(3) of the Actaccepting the NIL income disclosed by the petitioner after taking duecognizance of Form- 10 filed by the petitioner by observing as under: “…………………Shri Ashutosh Dixit, AR attended the assessment proceedings from time to time and filed writtensubmission/explanation. Books of account, bills, vouchers, etc.produced were put to test check and the case was discussed withhim.” “…………………Shri Ashutosh Dixit, AR attended the assessment proceedings from time to time and filed writtensubmission/explanation. Books of account, bills, vouchers, etc.produced were put to test check and the case was discussed withhim.” 2. The assessee is a society registered under societies Act withRegistrar of Society U.P. vide certificate No. 1398/2005-06 dated14.02.2006 which was renewed for a period of 5 years with effectfrom 14.02.2011. The assessee society was granted registration u/s12A of the Act, by the Ld. Commissioner of Income Tax, Kanpur videorder dated 25.09.2008. 3. The assessee society is running educational institutions. The totalreceipt during the year has been shown by the assessee atRs.8,80,22,040/- against which application for of fund towardscharitable purposes is Rs.7,93,25,060/- after submitting Form No.10which is 85%.” 6. Notice dated 31.03.2021 under section 148, after 4 years from the end ofthe relevant assessment year, was issued upon the petitioner. Reasonsrecorded for initiation of 147 proceedings against the petitioner [which wasprovided to the petitioner alongwith the letter dated 15.02.2022 issued undersection 143(2) of the Act by the Respondent No.3] reads as under: Reasons for reopening of the assessment in case of M/s Maa Bhagwati Devi Shikchhna Sewa Samiti for A.Y. 2013-14 u/s 147 of the Act. 1. Brief details of the assessee The assessee is a society involved in running a educationalinstitute(s). 2. Brief details of information collected/received by the AO: Return of income in this case was filed on 31.03.2014 at totalincome of Rs. Nil. Thereafter the case was selected under scrutiny andassessment was completed on 20.01.2016 at total income at Rs.Nil.From the records it is noticed that there was unapplied surplusincome of Rs.1,58,86,689/- for which assessee has submitted form 10on 31.03.2014 for accumulation of aforesaid amount of surplusincome. Under the provision of section 11(2), assessee had to submitthe form 10 for accumulation of income upto the date of filing itsreturn provided u/s 139(1) i.e. 30.09.2013 but it was submitted afterdue date as provided u/s 139(1) of IT Act,1961. 3. Analysis of information received: Since, there was unapplied surplus income of Rs.1,58,86,689/-for which assessee has submitted form 10 on 31.03.2014 belatedly foraccumulation of aforesaid amount of surplus income. Under theprovision of section 11(2), assessee had to submit the form 10 foraccumulation of income upto the date of filing its return provided u/s139(1) i.e. 30.09.2013 but it was submitted after due date i.e. belatedand return was not submitted in due date i.e. 30.09.2013. 4. Enquiries made by the AO as sequel to information received: From the records, it is clear that Form 10 for accumulation ofincome was filed belatedly and not within the due date of filing Returnof Income u/s 139(1) of the Act. Findings of the AO: From the records it is noticed that there was unapplied surplusincome of Rs.1,58,86,689/- for which assessee has submitted form 10on 31.03.2014 for accumulation of aforesaid amount of surplusincome. Under the provision of section 11(2), assessee had to submitthe form 10 for accumulation of income upto the date of filing itsreturn provided u/s 139(1) i.e. 30.09.2013 but it was submitted afterdue date as prescribed u/s 139(1) of the Act. Hence, deductionclaimed by the assessee for unapplied surplus income ofRs.1,58,86,689/- was not allowable u/s 11(2) and the same wasrequired to be disallowed and taxed as per the provisions of I.T. Act,1961. 5.Basis of forming reason to believe and details of escapement ofincome: From the above discussion, it is clear that there is anescapement of income to the tune of Rs. Rs.1,58,86,689/- for A.Y.2013-14. 6. Applicability of the provisions of section 147/151 of the Income TaxAct, 1961 to the facts of the case: 5.Basis of forming reason to believe and details of escapement ofincome: From the above discussion, it is clear that there is anescapement of income to the tune of Rs. Rs.1,58,86,689/- for A.Y.2013-14. 6. Applicability of the provisions of section 147/151 of the Income TaxAct, 1961 to the facts of the case: Provisions of section 147 are applicable to facts of this caseand the assessment year under consideration is deemed to be a case where income chargeable to tax escaped assessment. In view of theabove, on the basis of information available on record I have reasonto believe that the income of Rs. Rs.1,58,86,689/- chargeable to taxhas escaped assessment within the meaning of section 147 of the ITAct, 1961 on account of interest income. Therefore, necessaryapproval to issue notice u/s 148 is being obtained separately fromCommissioner of Income Tax (Exemption), Lucknow as per theprovisions of section 151 of the IT Act.” 7. 7. The petitioner filed his objection to the initiation of reassessmentproceedings proceedings on the following grounds: a) No escapement of income of Rs.1,58,86,689/- (as alleged) on thebasis of the belated filing of Form – 10, as several judicialpronouncements have held that if the same is filed during the courseof assessment proceedings, then the same is to be accepted; b) Nothing is contained in section 11(2)(a) of the Act regarding period for furnishing of Form – 10, the period provided under Rule 17. Thisperiod of filing on or before due date under section 139(1) whichrelates to the time period for furnishing of return, was provided onlywith effect from A.Y. 2016-17 by Finance Act, 2015. c) As per various judicial pronouncements time limit provided under Rule 17 was directive in nature and not mandatory. d) Reason to believe as recorded is wholly based on the review ofAssessment Order made under section 143(3) of the Act which hastaken cognizance of Form – 10 furnished by assessee belatedly butaccepted by the Assessing Officer during the course of regularassessment proceedings, therefore, it amounts to review of assessmentorder; e) Reason to believe as recorded is vitiated by the legal mischief of thechange of opinion. Reliance in this regard was placed on decisions ofCIT Vs. Kelvinator of India Ltd., reported in (2010) 320 ITR 561(SC), H. K. Buildcon Ltd. Vs. ITO, reported in (2011) 339 ITR 535(Guj.) and Jagran Prakashan Ltd. Vs. CIT, reported in (2014) 226Taxman 36 (Alld.); f) First proviso to section 147 is applicable as there is no failure onthe part of the Petitioner Society to disclose truly and correctly allmaterial facts necessary for the assessment, therefore, the proceedingsare barred by limitation. 8.By an order dated March 3, 2022, the respondent no. 3 rejected theobjections raised by the petitioner primarily on the ground that Form-10 wasnot submitted by the petitioner before the due date of filing of return underSection 139 (1) of the Act. 9.Subsequently, the respondent no.3, during the pendency of the writpetition, passed the assessment order dated March 19, 2022 under Section147 read with Section 144(B) of the Act assessing the income of petitioneras Rs. 1,58,86,689/- and imposed demand of Rs. 1,03,00,246/- upon thepetitioner with the following observations: “In the present case, no explanation is discernable as to why assesseefailed to comply with this requirement. The assessee ought to haveapplied under Form No. 10 for permission to accumulate as providedin section 11(2). The assessee has pleaded that as per the law, thedelay is being generally condoned. But one has to provide the reasonsfor such a delay and apply for condonation of delay in a reasonabletime period before due date specified u/s. 139(1) of the Act. Itabundantly clear from the wordings of sub-section (2) of section 11that it is mandatory for the person claiming the benefit of section 11 tointimate to the A.O particulars required under rule 17 in Form No. 10of the Act.” Contentions of the petitioner “In the present case, no explanation is discernable as to why assesseefailed to comply with this requirement. The assessee ought to haveapplied under Form No. 10 for permission to accumulate as providedin section 11(2). The assessee has pleaded that as per the law, thedelay is being generally condoned. But one has to provide the reasonsfor such a delay and apply for condonation of delay in a reasonabletime period before due date specified u/s. 139(1) of the Act. Itabundantly clear from the wordings of sub-section (2) of section 11that it is mandatory for the person claiming the benefit of section 11 tointimate to the A.O particulars required under rule 17 in Form No. 10of the Act.” Contentions of the petitioner 10.The contentions of the petitioner is that the Assessing Officer hasacted in haste and passed a non-speaking order on March 2, 2022 disposingof the objections raised by the petitioner. The petitioner further submittedthat not only the assessment order dated March 19, 2022 is completely silentupon the applicability of the first proviso to Section 147 of the Act, theentire exercise of reassessment is only a change of opinion on the issue ofavailability of exemption under Section 11 of the Act by the AssessingOfficer, that had been granted by the Assessing Officer while passing the regular assessment order after taking into consideration Form-10 filed by thepetitioner. 11.The petitioner further contended that umpteen judgments of SupremeCourt and various High Courts have held that delay in filing Form-10 iscondonable and Rule 17 of the Act is directly and not mandatory. Contentions of the respondents 12. Per contra, learned counsel for the respondents supported the initiation ofreassessment proceedings, the order passed on March 3, 2022 and theassessment order passed on March 19, 2022. Learned counsel submitted thatnon filing of Form-10 within time is fatal in nature and the petitioner couldnot have claimed the exemption under Section 11 of the Act if such formwas not filed within time. He further submitted that the factual aspect of latereceiving of Form-10 came to the knowledge of the Assessing Officer on alater date and accordingly amounts to new material. He also submitted thatthis clearly shows that it is not a mere change of opinion that has led to theinitiation of reassessment proceedings. Analysis and Conclusion 13. Before entering into the controversy, we would like to put on recordthe relevant Section 11(2) of the Act and Rule 17 of the Rules. The same areprovided below: “Section 11(1)…………………….. (2) Where [eighty-five] per cent of the income referred to in clause (a)or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, tocharitable or religious purposes in India during the previous year butis accumulated or set apart, either in whole or in part, for applicationto such purposes in India, such income so accumulated or set apartshall not be included in the total income of the previous year of theperson in receipt of the income, provided the following conditions arecomplied with, namely:— [(a) such person furnishes a statement in the prescribed form and inthe prescribed manner to the Assessing Officer, stating thepurpose for which the income is being accumulated or set apartthe prescribed manner to the Assessing Officer, stating thepurpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or setapart, which shall in no case exceed five years; (b) the money so accumulated or set apart is invested or depositedin the forms or modes specified in sub-section (5);in the forms or modes specified in sub-section (5); [(a) such person furnishes a statement in the prescribed form and inthe prescribed manner to the Assessing Officer, stating thepurpose for which the income is being accumulated or set apartthe prescribed manner to the Assessing Officer, stating thepurpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or setapart, which shall in no case exceed five years; (b) the money so accumulated or set apart is invested or depositedin the forms or modes specified in sub-section (5);in the forms or modes specified in sub-section (5); (c) the statement referred to in clause (a) is furnished [at least twomonths prior to] the due date specified under sub-section (1) ofSection 139 for furnishing the return of income for the previousyear:months prior to] the due date specified under sub-section (1) ofSection 139 for furnishing the return of income for the previousyear: Provided that in computing the period of five years referredto in clause (a), the period during which the income could notbe applied for the purpose for which it is so accumulated or setapart, due to an order or injunction of any court, shall beexcluded.] Rule 17 (1)- The option to be exercised in accordance with theprovisions of the explanation to sub-section (1) of section 11 of theAct in respect of income of any previous year relevant to theassessment year beginning on or after the 1st day of April, 2016 shallbe in Form No. 9A and shall be furnished before the expiry of thetime allowed under sub-section (1) of section 139 of the Act forfurnishing the return of income of the relevant assessment year.” 14. One may rely upon the judgment of this Court in CIT Vs. Moti RamGopi Chand Charitable Trust, reported in (2014) 360 ITR 598 (Alld.), thatspecifically dealt with the issue at hand. The relevant paragraphs areprovided below: “8. In Nagpur Hotel Owners Association’s case (supra) the SupremeCourt held that the notice of accumulation must be given to theassessing authority under section 11 before the assessment isconcluded. It was held that the assessing authority must have thisinformation at the time he completes the assessment. In the absence ofany such information it will not be possible for the assessing authorityto give the assessee the benefit of such exclusion and once theassessment is so completed, it would be futile to find fault with theassessing authority for having included such income in the assessableincome of the assessee. Therefore, even assuming that there is novalid limitation prescribed under the Act and the Rules even then. It is reasonable to presume that the intimation required under section 11has to be furnished before the assessing authority completes theconcerned assessment. In the present case, the application undersection 11(2) was not filed with the return. The information, however,was given during the process of the assessment, before the assessmentwas completed. The assessee had given notice under section 11(2)(a)of the Act read with rule 17 of the Rules of 1962 for accumulation ofincome to the Additional Commissioner of Income-tax. The AssessingOfficer, however, did not consider the contention of the assessee. reasonable to presume that the intimation required under section 11has to be furnished before the assessing authority completes theconcerned assessment. In the present case, the application undersection 11(2) was not filed with the return. The information, however,was given during the process of the assessment, before the assessmentwas completed. The assessee had given notice under section 11(2)(a)of the Act read with rule 17 of the Rules of 1962 for accumulation ofincome to the Additional Commissioner of Income-tax. The AssessingOfficer, however, did not consider the contention of the assessee. 9. We do not find substance in the contention of Shri Shambhu Choprathat unless the information, which was otherwise provided by theassessee is furnished in Form 10, the Assessing Officer could not havetaken into consideration and was entitled to reject it. The benefit ofthe exemption is on setting apart of the 85 per cent. Amount to bespent in the next year before the assessment is complete and not onthe furnishing of information on the prescribed form. There wassufficient material before the Assessing Officer both in the shape ofthe information furnished within the prescribed period and the proofof not only setting apart 85 per cent of the amount to be spent in thenext year but also the expenditure of that amount in the next year. Theinsistence of furnishing of information on Form 10 as a conditionprecedent, is insistence on the form and not the substance of theprovisions of the Act.” 15. One may also refer to the judgment of Supreme Court inCommissioner of Income-tax Vs. Nagpur Hotel Owners’ Association,reported in (2001) 247 ITR 201 (SC), wherein the Supreme Court has statedthat the particulars required with the Rules 17 of the Rules and the Form-10of the Act is required to be present before Assessing Officer at the time ofassessment proceedings. The relevant paragraph is provided below: “6. It is abundantly clear from the wordings of sub-section (2) ofSection 11 that it is mandatory for the person claiming the benefit ofSection 11 to intimate to the assessing authority the particularsrequired, under Rule 17 in Form No.10 of the Act. If during the assessment proceedings the Assessing Officer does not have thenecessary information, question of excluding such income fromassessment does not arise at all. As a matter of fact, this benefit ofexcluding this particular part of the income from the net of taxationarises fromSection 11 and is subjected to the conditions specifiedtherein. Therefore, it is necessary that the assessing authority musthave this information at the time he completes the assessment. In theabsence of any such information, it will not be possible for theassessing authority to give the assessee the benefit of such exclusionand once the assessment is so completed, in our opinion, it would befutile to find fault with the assessing authority for having includedsuch income in the assessable income of the assessee. Therefore, evenassuming that there is no valid limitation prescribed under the Act andthe Rules even then, in our opinion, it is reasonable to presume thatthe intimation required under Section 11 has to be furnished beforethe assessing authority completes the concerned assessment becausesuch requirement is mandatory and without the particulars of thisincome the assessing authority cannot entertain the claim of theassessee under Section 11 of the Act, therefore, compliance of therequirement of the Act will have to be any time before the assessmentproceedings.” Emphasis Added 16. One may also refer to judgment of CIT Vs. Sakal Relief Fund,reported in (2017) 81 taxmann.com 396 (Bombay)/[2017] 248 Taxman 31(Bombay) wherein their lordships have observed and held as under: Emphasis Added 16. One may also refer to judgment of CIT Vs. Sakal Relief Fund,reported in (2017) 81 taxmann.com 396 (Bombay)/[2017] 248 Taxman 31(Bombay) wherein their lordships have observed and held as under: “12. Today when the matter was called out, Mr. Tejveer Singh,learned Counsel for the Revenue does not dispute the fact that thedecision of the Delhi High Court in Association of Corporation andApex Societies of Handlooms (supra) and of this Court in Trustees ofTulsidas Gopalji Charitable and Chaleshwar Temple Trust (supra)would apply to the present facts. Therefore, Revenue accepts that evenif the Form 10 is filed during the re-assessment proceedings, thebenefit of accumulation under Section 11(2) of the Act is available. Solearned Counsel for the Revenue does not dispute the fact that thedecision of the Delhi High Court in Association of Corporation andApex Societies of Handlooms (supra) and of this Court in Trustees ofTulsidas Gopalji Charitable and Chaleshwar Temple Trust (supra)would apply to the present facts. Therefore, Revenue accepts that evenif the Form 10 is filed during the re-assessment proceedings, thebenefit of accumulation under Section 11(2) of the Act is available. So also, the time allowed in Rule 17 of the Rules for furnishing the formbefore the expiry of time to file the return of income under Section139(1) of the Act get extended to include the time within which areturn of income could be filed under Section 139(4) of the Act.Therefore, filing of Form 10 during re- assessment proceedings isfiling of the same within the time allowed for furnishing the return ofincome under Section 139(4) of the Act. Therefore, the Counsel for theRevenue has not been able to point out any reasons why the aforesaidtwo decisions should not be applied in the facts of the present case toreject the appeal. 13. It is only with regard to the decision of the Apex Court in NagpurHotel Owners’ Association (supra) that Mr. Tejveer Singh expressedreservation. According to him, the observations of the Apex Court thatForm 10 has to be filed before completion of Assessment Proceedingswere rendered in the context of fact that it was not filed during theAssessment Proceedings. Therefore, the fact situation being different,the observations therein cannot be applied to the present facts. In fact,we note that the Apex Court in the above case has observed that forthe purposes of excluding an income of the trust from the net oftaxation, the intimation in Form 10 has to be filed with the AssessingOfficer before he completes the Assessment. In fact, it is the context ofthe above finding of the Apex Court, that it observed that Form 10 hasto be filed before completion of Assessment Proceedings. In fact, theDelhi High Court in the case of Association of Corporation and ApexSocieties of Handlooms (supra) has also relied upon and sounderstood the decisions of the Apex Court in Nagpur Hotel Owners’Association (supra). Therefore, we do not find any merit in thereservations expressed by Mr. Singh, learned Counsel for the Revenueon the applicability of the Supreme Court order in case of NagpurHotel Owners’ Association (supra) to the present facts. 14. In the above view, the question as proposed stands concludedagainst the Revenue by the decision of the Apex Court in NagpurHotel Owners’ Association (supra) and the decision of this Court in Tulsidas Gopalji Charitable and Chaleshwar Temple Trust (supra)and the Delhi High Court in case of Association of Corporation andApex Societies of Handlooms (supra). The Revenue has not been ableto point out as to why the ratio of the three above decisions should notbe made applicable to the facts of the present case and the appealfiled by the Revenue not be entertained. 15. Therefore, the proposed question as framed, for the above reasons,do not give rise to any substantial question of law. Hence, notentertained. 16. Accordingly, Appeal dismissed. No order as to costs.” 14. In the above view, the question as proposed stands concludedagainst the Revenue by the decision of the Apex Court in NagpurHotel Owners’ Association (supra) and the decision of this Court in Tulsidas Gopalji Charitable and Chaleshwar Temple Trust (supra)and the Delhi High Court in case of Association of Corporation andApex Societies of Handlooms (supra). The Revenue has not been ableto point out as to why the ratio of the three above decisions should notbe made applicable to the facts of the present case and the appealfiled by the Revenue not be entertained. 15. Therefore, the proposed question as framed, for the above reasons,do not give rise to any substantial question of law. Hence, notentertained. 16. Accordingly, Appeal dismissed. No order as to costs.” 17. In the light of above judgments, it is crystal clear that Form-10 underRule 17 of the Rules is required to be filed before the Assessing Officerbefore he completes the assessment. In a case, where Form-10 is filed latebut is filed before the Assessing Officer completes the assessment, benefit ofSection 11(2) of the Act shall be available to the assessee. From a reading ofimpugned notice, the order dated March 3, 2022 and assessment order datedMarch 19, 2022, it appears that the Assessing Officer has paid no heed to theratio laid down in the judgment of the Supreme Court and various HighCourts including the Coordinate Bench of this Court. 18.We, accordingly, have no hesitation in holding that the entire processof reassessment that has been initiated by the Department holds no water andis without any legal basis whatsoever. 19. In light of the above, we quash the notice dated 31.03.2021 issuedunder Section 148 of the Act, order passed rejecting the objection of thepetitioner dated March 3, 2022 and the reassessment order passed by theAssessing Officer on March 19, 2022. 20.The writ petition is accordingly allowed.21. Let a urgent certified copy of this order, if applied, be provided to theparties. Order Date :- December 06, 2023Ashish (Shekhar B. Saraf, J.) (Siddhartha Varma, J.)